Individual Practice Areas

Everybody Wins

except the Victim, of course

Medical Malpractice is Big Business

In 2012, medical malpractice cases generated $3.6 billion in total payouts. It was a decrease of $100 million (3%) from 2011, but still, obviously, a large number. But large compared to what? And if you are the victim of medical negligence, what do you care?

The average settlement or verdict in 2012 was about $290,000, an amount equal to the average payout in 1998. Yet still, plaintiffs, the injured persons, are getting the short-end of the stick as everyone involved cries out about how bad the system is for them.

Insurance companies and lawyers (on BOTH sides) are all making significant sums of money. And contrary to the public portrayal, evidence does not bear out that doctors are suffering. In fact, many actually use the perception of a “malpractice crisis” to their benefit.

Facts:

65% of malpractice claims were dropped, dismissed, or withdrawn before trial

25% of malpractice claims were settled

4.5% were decided by alternative dispute resolution

5% were resolved at trial, with physicians prevailing in 80-90% of those cases.

Doctors

Many doctors support tort reform because of what they consider to be a “medical malpractice crisis.” This crisis they speak of is an increase in their malpractice insurance costs caused by, what they deem to be, frivolous lawsuits and runaway jury awards (high jury-awarded compensation amounts). However, a 2003 USA TODAY study concluded that doctors’ insurance premiums are rising at the same speed as health care costs. In fact, doctors, on average, still spend less on malpractice insurance – 3.2% of their revenue – than on rent. In other words, the exorbitant prices doctors claim to pay in insurance is really very reasonable, especially considering that medical error is the third leading cause of death in the United States. When up to 440,000 Americans are dying annually from medical error, doctors’ complaints about the price of malpractice insurance should fall on deaf ears. There is clear evidence supporting the need for malpractice insurance, no matter the price. If doctors don’t want their malpractice insurance to rise, they need to take further steps to prevent negligence. The answer is not to cap compensation, when doctors cause lifelong pain and suffering.

Insurance Executives

Heightened medical malpractice insurance premiums are the result of both financial trends and the competitive behavior in the insurance industry. The profit of the top ten medical malpractice insurers was higher than 99% of the Fortune 500 companies. This is partially due to the fact that insurers overestimate their losses. When insurance companies estimate their losses too low, they have to revise their incurred losses upwards. This is bad for their capital. If, for example, a company says it will have to pay $2.5 million in 2012, but then realizes in 2013 that it had to pay $3 million, the company’s bottom line becomes negative, -$500,000. Not wanting to put their companies at a disadvantage, the insurance executives made the self-serving decision to overestimate their losses. Doctors saw their premiums rise dramatically in response to the insurer’s systematically overestimated losses; the high profits of malpractice insurance companies were made from the very clients they were supposed to serve in good faith. Of course, the insurance executives have no incentive to end the system. Most systems benefit insurance. The CEO of UnitedHealth makes $94,180,531 annually; the CEO of Anthem makes $24,969,719 annually; the CEO of WellPoint makes $21,767,532 annually.

Yes, these executives (and numerous others) make well into eight figures per year. And the insurance industry has the audacity to blame trial lawyers. Well, only the plaintiff-side trial lawyers, of course.

Insurance Companies, Adjusters & the Reality of Trial

Insurers may try to settle a catastrophic case if they fear that a “runaway” verdict, a high-paying verdict (from an unpredictable jury) in a state without caps, could exceed policy limits. If evidence is not particularly strong on the plaintiff’s side, or if the case seems like a toss-up, the defendant’s lawyers often try to discount the settlement to reflect the odds of a trial. However, 35–60 percent of the toss-up cases are abandoned or dismissed without a penny of payment. The claimants receive nothing despite the 50/50 chance that experts are to conclude the malpractice claim is of merit. In the worst-case scenario of a toss-up claim, the victim won’t be able to find a lawyer that is willing to risk the capital of pursuing the claim. Trial is incredibly costly. This means that even if there is evidence that could potentially generate a pay-out, many plaintiff attorneys will deem the case too risky to take on. Thousands of injured people will suffer, uncompensated, from an ailment caused by a health care provider.

Often times, however, plaintiff lawyers really can’t help the injured party. Though there may be injury, it may be too difficult to prove evidence of negligence or violation of standard care. It would be impossible for plaintiff lawyers to run their practices and care for themselves and their families if they take cases simply out of empathy for the injured; their firms would run out of capital and fail very quickly. Trial costs and settlement packages are exorbitant – often $80,000. No one can run a successful firm while footing the bill simply out of the goodness of her heart.

Med Mal Lawyers

Plaintiff

In the vast majority of medical malpractice cases, plaintiff lawyers are only paid if their client wins. This type of arrangement is known as a contingency agreement. The contingent fee arrangement is particularly important in medical malpractice cases because it means that lawyers must take a large portion of their client’s awarded compensation amount. Typically, this means that the lawyer will end up with 33%-50% of the total award in winning cases. A contingency agreement allows plaintiff lawyers to not only take fewer cases (the cases they believe they will win), but also to offset the probability that they will get nothing from other lawsuits that they lose. In large cases that settle quickly, contingent fee contracts produce substantial payouts to lawyers for what seems to be very little effort. The financial interest that lawyers have under the contingent fee system has become a major source of controversy among physicians. Some physicians believe the contingent fee system encourages lawyers to sue for greater amounts of money and even poach clients who may not necessarily want to sue. Because contingent fees take away the money awarded to care for the plaintiff’s injury, many lawyers, for this reason, oppose the cap on non-economic damages.

Defense

Plaintiff lawyers are not the only ones making a sweet profit from medical malpractice claims. The defense lawyers charge their clients hourly, often more than $350/hour. Accordingly, there is less incentive for the defense attorneys to close the cases quickly – a typical case lasts about 2 years, during which time no one but the defense lawyers are getting paid. Unlike plaintiffs’ attorneys, defense attorneys, do not pay for research expenses, expert witness fees, and other overhead costs.

In 2013, a prominent medical malpractice defense lawyer said to me, “I tell everyone there is medical malpractice crisis and we have to fix it … right after my youngest gets through college.”

Everyone in medical malpractice, as in life, has their own agenda based on their own personal incentives. It’s an important fact to remember. I, for one, don’t begrudge anyone their incentives. Not the docs, the lawyers, or even the insurance exec making nearly $100 mil a year. There are two things I do resent, however. First is misinformation and hidden motives. Second is the series of 1000 little things that limit access to the courts for victims of medical negligence. Playing fields should be level.

Pain and Suffering Caps

As difficult as calculating economic losses are, the more controversial part of calculating damages is estimating the dollar value of non-economic losses. In particular, there is substantial disagreement over the way to measure the non-economic losses of “pain and suffering” that results from injury. Until the mid 1970’s, juries were largely free to award winning plaintiffs as much as they thought was appropriate, limited only by constraints on punitive damage sums. Now, however, many states, though not all, have legislated medical malpractice reforms in response to widely contested claims that lawsuit costs have driven up medical costs and medical malpractice insurance premiums. Compensation caps limit the potential monetary damages recoverable in medical malpractice lawsuits. This cap exists regardless of the actual amount of pain and suffering the injured person has and will endure.

Capping pain and suffering damages means that those with larger, more serious injuries will not be compensated with an amount larger than the monetary cap. In Texas, for example, a brain damage victim’s pain and suffering losses are capped at $250,000. A lifetime of disability compensated by $250,000 – that’s about as much as a private doctor makes in a single year. Some conservatives like President Bush along with many doctors and insurance executives have pushed for a national $250,000 cap, though luckily, this was shot down. While Bush’s battle was lost, the war is not won. More than 25 states – including Maryland – now have caps, giving health care providers less of an incentive to avoid more severe injuries. If liability is limited and monetary consequences are conclusive, doctors may be more willing to suggest riskier surgeries or perform with less care.

For all these reasons, it is doubtful that capping pain and suffering damages (or even a more advanced limitation system of ceilings and floors) will improve the medical malpractice field. Even if capping somewhat increases the predictability of the system, its price in terms of deterrence and fair compensation is too high. It cannot be right that a person will suffer for a lifetime without proper compensation, all because of a doctor’s mistake. Accordingly, the American Law Institute reporters were against caps, as was the ABA Action Commission to Improve the Tort Liability System and several state courts, which have struck down legislative caps on pain and suffering damages on various constitutional grounds.

Some states have enacted tort law reform in other related ways. In this area, legislatures have enacted changes in the rules governing joint and several liability, whether damages would be made in lump sum or periodic payments, and the extent to which collateral sources of payments would reduce damage awards. Another substantial area of tort reform has addressed how long people would have to bring lawsuits. Many states enacted changes to their statutes of limitation, usually shortening the period available to bring suit.

What Should You Do

The medical malpractice system is an adversarial system and everyone has a hand out. Doctors, insurance executives, and both sets of lawyers want to maximize profits. All the while, the injured person and his or her loved ones are suffering physically, mentally, and emotionally. Even if the injured party does win, often times, his compensation is disproportionate to the pain and suffering he had and will endure. Everyone wins except the injured person.